UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

☒  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended November 30, 2018

 

☐  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

 

For the transition period from ___ to ____

 

Commission file number: 000-55590

 

HEMP NATURALS, INC.

(Exact name of registrant as specified in its charter)

   

Delaware

(State or other jurisdiction of incorporation or organization)

 

47-5604166

(I.R.S. Employer Identification No.)

 

16950 North Bay Road, Suite 1803

Sunny Isles Beach, Florida

(Address of principal executive offices)

 

33160

(Zip Code)

 

 

Registrant’s telephone number, including area code:   (347) 301-8431

 

Securities registered pursuant to Section 12(b) of the Act:   None

 

Securities registered pursuant to Section 12(g) of the Act:   Common Stock, no par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐   No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes ☐   No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒   No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes ☒ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐ Accelerated filer  ☐ Non-accelerated filer  ☐
(Do not check if a smaller reporting company)
Smaller reporting company  ☒ Emerging growth company  ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  

Yes ☐   No ☒

 

The aggregate market value of the voting stock held by non-affiliates of the registrant as of May 31, 2018 was $1,698,302 based on the price at which our common stock was last sold, $0.25 per share, on November 30, 2018.

 

The number of shares outstanding of the issuer’s classes of Common Stock as of March 8,, 2019 was 329,463,216.

 

1  

 

HEMP NATURALS, INC.

FORM 10-K

For the Year Ended November 30, 2018

 

INDEX

        Page
PART I
Item 1.   Business   3
Item 1A.   Risk Factors   5
Item 1B.   Unresolved Staff Comments   5
Item 2.   Properties   5
5Item 3.   Legal Proceedings   5
Item 4.   Mine Safety Disclosures   5
PART II
Item 5.   Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   6
Item 6.   Selected Financial Data   6
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations   7
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk   8
Item 8.   Financial Statements and Supplementary Data   F1-F15
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   9
Item 9A.   Controls and Procedures   10
Item 9B.   Other Information   10
PART III
Item 10.   Directors, Executive Officers and Corporate Governance   11
Item 11.   Executive Compensation   12
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   12
Item 13.   Certain Relationships and Related Transactions, and Director Independence   13
Item 14.   Principal Accounting Fees and Services   13
PART IV
Item 15.   Exhibits, Financial Statement Schedules   14
Signatures   15

 

2  

 

PART I

 

ITEM 1.  BUSINESS

 

When used in this Form 10-K, the words "expects," "anticipates," "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties, including those set forth below under "Risks and Uncertainties," that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. Hemp Naturals, Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based. This discussion should be read together with the financial statements and other financial information included in this Form 10-K. Readers should carefully review the risk factors described  in  other  documents  the Company files from time  to  time  with  the  Securities  and Exchange Commission,  including  the Quarterly Reports on Form 10-Q to be filed  by the Company subsequent to this Annual Report on Form 10-K and any Current Reports  on  Form 8-K filed by the Company.

 

Background

 

Hemp Naturals, Inc., a Delaware corporation (“the Company”) was incorporated on November 13, 2015 under the laws of the state of Delaware. We have performed limited business operations and have generated no revenue to date.

 

Our Business

 

Hemp Naturals, Inc. is an early stage company that plans to research, develop, acquire and sell products made of industrial hemp. While the company will have a wide range of products and supplementary goods to go with our primary line up, the focus will be, at least initially, upon rolling papers made out of industrial hemp. Currently our rolling papers are available to purchase in twenty-five retail establishments comprised of gas stations, convenience stores, tobacco shops and liquor stores. At the date of this filing, all transactions have been at a promotional rate with no revenues realized by the Company. The Company’s purchases of rolling papers were recorded as advertising and promotion expense. Our expectation is that the promotional phase of rolling paper sales will transition to profitable operations during the next fiscal year. In the future, additional products may include, but not be limited to, hemp clothing, nutritional hemp health supplements, hemp shakes and/or foods, and beauty supply products with hemp as the key ingredient.

 

One of the keys to the success of our future business will be establishing positive and long lasting relationships with companies which manufacture products made out of industrial hemp. If we can acquire these products wholesale and at low prices, we will be able to subsequently resell them under the Hemp Naturals name to the general population at a significant profit. Currently, the Company is collaborating with one rolling papers wholesaler to develop a new design for and produce our product. We expect the newly designed product to be available to sell in the next fiscal year.

 

The growing demand and need for hemp products gives us an ideal environment in which to enter the already competitive hemp industry. As the demand grows, and indeed as it has continued to grow steadily over the past several years, so too does the need for high quality goods. Through an aggressive marketing plan which will primarily utilize social media, but may also rely on print media, radio spots, and other as of yet unnamed methods, we aim to become the first retailer that enters an individual’s mind when they think of hemp goods. We have set up our company website, Hempofnaturals.com, and are currently working on setting up an additional website, RollingNaturals.com, to sell our product directly to consumers online.

 

3  

 

There has been some controversy surrounding industrial hemp, due to the fact that it comes from the same plant as marijuana. Due to these concerns, and the illegal nature of the sale of marijuana in the majority of states within the United States, Hemp Naturals, Inc. plans to follow all federal regulations and statutes pertinent to the sale of hemp-based goods. Hemp Naturals does not intend to import or export any products containing THC. The U.S. Customs Service has a “zero tolerance standard” for the importation of industrial hemp, meaning that a product cannot have any potentially dangerous substances contained in it or it will be considered adulterated and unfit for human consumption, and thus illegal to possess or use per U.S. Federal Law. In 2001 the DEA elaborated on this and clarified that any product with any quantity of THC in it at all cannot be imported into the United States. Since no hemp based products containing THC are legally permitted in the United States these products are not allowed to be exported out of the United States either. Because of the strict laws that exist with the U.S. importation and exportation of industrial hemp products, our business could be adversely affected and even if our products contain no THC there exists the possibility that any hemp-based products could be deemed illegal if a change in law were to occur. There are no foreign countries, to our knowledge, that have laws which could negatively affect the importation or exportation of our hemp based products since they will not contain any THC.

 

Business Progress

 

To date, our operations have consisted of developing our website and producing and distributing hemp-based rolling papers as promotion for the Company with the expectation of profitable operations in the next fiscal year.

 

We have two part time employees, Levi Jacobson our Chief Executive Officer and Maryna Bleier our Secretary. Currently, both Mr. Jacobson and Ms. Bleier have the flexibility to work on our business up to 25 to 30 hours per week, but are prepared to devote more time if necessary. We do not presently have pension, health, annuity, insurance, stock options, profit sharing, or similar benefit plans; however, we may adopt plans in the future. There are presently no personal benefits available to our officer and director. During the initial implementation of our business plan, we intend to hire independent consultants to assist in the development and execution of our business operations.

 

Competition

 

The industry in which Hemp Naturals, Inc. competes is highly competitive. Many Companies offer hemp-based goods such as clothes, cosmetics, and foods and at competitive prices. As we are small and have very limited resources we may not be able to compete with our larger, better financed competitors. We may also not be able to offer our goods at as low of prices as our competitors, making it difficult to make sales and increase brand awareness. We will also be in competition with non-hemp-based products.

 

4  

 

ITEM 1A.  RISK FACTORS

 

This item is inapplicable because we are a "smaller reporting company" as defined in Exchange Act Rule 12b-2.

 

ITEM 1B.  UNRESOLVED STAFF COMMENTS

 

This item is inapplicable because we are a "smaller reporting company" as defined in Exchange Act Rule 12b-2.

 

ITEM 2.  PROPERTIES

 

We do not own any property. Our main office space is provided by our Secretary, Maryna Bleier at $5,000 per month which is accounted for as contributed capital. Additional office space has been contracted through May 7, 2024. The owners of this space have been compensated with common shares issued.

 

ITEM 3.  LEGAL PROCEEDINGS

 

Hemp Naturals, Inc. is not a party to any material pending legal proceeding.

 

ITEM 4.  MINE SAFETY DISCLOSURES

 

Not applicable.

 

5  

  

PART II

 

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

(a) Market information and issuance of unregistered securities

 

Currently the Company’s shares are traded on the OTC exchange as HPMM.

 

(b) Holders

 

As of January 16, 2019, there were 57 record holders of common stock.

 

(c) Dividends

 

The Company has not paid any dividends on its common stock.  The Company currently intends to retain any earnings for use in its business, and therefore does not anticipate paying cash dividends in the foreseeable future.

 

(d) Equity Compensation Plans

 

None

 

(e) Company repurchases of common stock during the year ended November 30, 2018

 

None

 

(f) Performance Graphic

 

The Company is not required to provide a performance graph since it is a "smaller reporting company" as defined in Regulation S-K Rule 10(f).

 

(g) Recent Sales of Unregistered Securities

 

On October 11, 2017 170,000 shares of common stock were sold to 1 purchaser at a purchase price of $0.03 per share for gross proceeds of $5,000.

 

On October 18, 2017 1,250,000 shares of common stock were sold to 1 purchaser at a purchase price of approximately $.03 per share for gross proceeds of $37,500.

 

On October 5, 2018 400,000 shares of common stock were sold to 2 purchasers at a purchase price of approximately $.03 per share for gross proceeds of $20,000.

 

On November 13, 2018 50,000 shares of common stock were sold to 1 purchaser at a purchase price of approximately $.08 per share for gross proceeds of $4,000.

 

ITEM 6.  SELECTED FINANCIAL DATA

 

As a smaller reporting company, we are not required to respond to this item.

 

6  

 

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

 

Critical Accounting Policies and Estimates

 

Use of estimates.

 

  In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, inventories, deferred income taxes and the estimation on useful lives of property, plant and equipment. Actual results could differ from those estimates.

 

Results of Operations

 

We had a loss from operations for the year ended November 30, 2018 of $5,754,945 including professional fees of $5,386,285, and organization and related expenses of $368,660. This is compared to an operating loss of $3,973,404 for the year ended November 30, 2017, which included professional fees of $146,244, share-based compensation of $3,600,000 and organization and related expenses of $227,180. The increase in net loss is due to increases in professional fees, rent and compensation. We project we will continue to have losses from operations until such time as we have sales from operations.

 

To provide cash for our operations, the Company has issued convertible promissory notes to several purchasers and has conducted private sales of shares of the Company’s common stock.

 

There can be no assurance that our efforts to implement our business plan will be successful or that we will obtain revenues or profitability.

 

Information included in this report includes forward looking statements, which can be identified by the use of forward-looking terminology such as may, expect, anticipate, believe, estimate, or continue, or the negative thereof or other variations thereon or comparable terminology. The statements in "Risk Factors" and other statements and disclaimers in this report constitute cautionary statements identifying important factors, including risks and uncertainties, relating to the forward-looking statements that could cause actual results to differ materially from those reflected in the forward-looking statements.

 

Our activities have mostly been devoted to seeking capital and development of a business plan. Our auditors have included an explanatory paragraph in their report on our financial statements, relating to the uncertainty of our business as a going concern, due to our lack of operating history or current revenues, its nature as a start-up business, management's limited experience and limited funds. We do not believe that conventional financing, such as bank loans, is available to us due to these factors. We have no bank line of credit available to us. Management believes that it will be able to raise the required funds for operations from one or more future offerings, in order to fully implement our business plan.

 

Our future operating results are subject to many facilities, including:

 

  • Our success in developing new hemp-based products;
     
  • The success of marketing and distributing those products;
     
  • Our ability to obtain additional financing; and
     
  • Other risks which we identify in future filings with the SEC.

 

Any or all of our forward looking statements in this prospectus and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward looking statement can be guaranteed. In addition, we undertake no responsibility to update any forward-looking statement to reflect events or circumstances which occur after the date of this prospectus.

 

7  

 

Contractual Obligations and Off-Balance Sheet Arrangements

 

We do not have any contractual obligations or off balance sheet arrangements.

 

Liquidity and Capital Resources

 

Our accountants have issued, in their audit report, a going concern opinion reflecting a conclusion that our operations may not be able to continue because of a lack of financial resources. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any revenues since inception. For the year ended November 30, 2018, the Company has a net loss of $6,497,319 and an accumulated deficit of $10,521,422 at November 30, 2018. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. . At the date of this filing, management has spent several months focused on marketing, both online and at the retail level. The Company’s website has been developed Our expectation is that the promotional phase of rolling paper sales will transition to profitable operations during the next fiscal year, however there is no certainty regarding this. In the meantime, we plan to raise money in the next fiscal years by issuing convertible notes and privately selling shares of common stock. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

For the year ended November 30, 2018, the Company recorded a net loss of $6,497,319 compared to net a loss of $3,973,404 for the year ended November 30, 2017. The change in operating expenses is due to increased professional fees, inventory purchases and increased organizational and related expenses, which consisted primarily of office rent expense and compensation. During the year ended November 30, 2017, a total of 250,700,000 shares of common shares were issued as compensation for services rendered to the Company and prepayment for consulting and office rent. These shares were valued at the most recent sales price of $.03 per share. During the year ended November 30, 2018, a total of 58,000,000 shares of common stock were issued as compensation for prepayment for consulting. These share were valued at the most recent sales price of $.155 per share.

 

For the year ended November 30, 2018, the Company used $207,112 in cash in operating activities, compared to $164,292 used for the year ended November 30, 2017. The change in cash flow is due to increased operating expenses for the period.

 

For the year ended November 30, 2018, the Company financing activities provided $305,350 in cash, compared to $118,286 for the year ended November 30, 2017. The increase in 2018 was primarily due to an increase convertible notes sold by the Company.

 

   

November 30,

2018

 

 

November 30,

2017

Cash     $ 98,248     $ 11

 

The increase in cash of $98,237 since the end of fiscal year 2017 was due to increased sales of convertible notes. There are no limitations on our ability to access our cash.

 

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

8  

 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Hemp Naturals, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Hemp Naturals, Inc. (the Company) as of November 30, 2017, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2017 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Emphasis-of-a-matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 to the financial statements the Company has not generated any revenue since inception. For the year ended November 30, 2017, the Company had a net loss of $3,720,404 and an accumulated deficit of $4,034,102 as of November 30, 2017. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3 to the accompanying financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Paritz & Company, P.A.
   
We have served as the Company’s auditor since 2018.
   
Hackensack, New Jersey  
August 7, 2018  

 

F- 1  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   

To the Board of Directors and Stockholders of

Hemp Naturals, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Hemp Naturals, Inc. (the Company) as of November 30, 2018, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2018 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Emphasis-of-a-matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 to the financial statements the Company has not generated any revenue since inception. For the year ended November 30, 2018, the Company had a net loss of $6,497,319 and an accumulated deficit of $10,521,422 as of November 30, 2018. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3 to the accompanying financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Prager Metis CPA’s LLC
   
We have served as the Company’s auditor since 2018.
   
Hackensack, New Jersey  

March 15, 2019

 

 

 

 

  F- 2  

HEMP NATURALS, INC.

BALANCE SHEETS  

 

    November 30, 2018   November 30, 2017
ASSETS              
Current Assets              
          Cash   $ 98,248     $ 11
          Other Receivable     4,525       —  
          Inventory     11,141       —  
          Prepaid Expenses     7,231,200       3,720,725
Total Current Assets     7,345,115       3,720,736
               
TOTAL ASSETS   $ 7,345,115     $ 3,720,736
               
LIABILITIES & STOCKHOLDERS’ EQUITY              
Current Liabilities              
          Derivative Liability   $ 915,878     $ —  
          Convertible Notes Payable, net of debt discount of $210,001     73,020       —  
          Accrued Expenses     25,806       9,074
Total Current Liabilities     1,014,704       9,074
               
TOTAL LIABILITIES     1,014,704       9,074
               
Stockholders’ Equity              
Preferred stock, $.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of November 30, 2018 and 2017     —         —  
               
Common stock, $.0001 par value, 500,000,000 shares authorized, 324,739,783 and 266,125,983 shares issued and outstanding as of November 30, 2018 and 2017, respectively     32,474       26,613
Subscription Receivable     (4,000 )     —  
Additional Paid in Capital     16,823,358       7,709,151
Accumulated Deficit     (10,521,422 )     (4,024,102)
               
Total Stockholders’ Equity     6,330,411       3,711,622
               
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY   $ 7,345,115     $ 3,720,736

 

The accompanying notes are an integral part of these financial statements.

 

  F- 3  

 

HEMP NATURALS, INC.

STATEMENTS OF OPERATIONS

   

    For the year ended November 30, 2018   For the year ended November 30, 2017
Revenue   $ —       $ —  
               
Operating Expenses              
General and Administrative     5,754,945       3,973,404
Total Operating Expenses     5,754,945       3,973,404
               
Loss from Operations   $ (5,754,945 )   $ (3,973,404)
               
Other Income(Expenses):              
Interest Expense     (469,374 )     —  
Loss on Extinguishment of Debt     (1,561 )     —  
Loss on Change of Fair Value of Derivative Liability     (271,439 )     —  
Total Other Expenses     (742,374 )     —  
Loss Before Income Tax Provision   $ (6,497,319 )   $ (3,973,404)
Income Tax Provision     —         —  
Net Loss   $ (6,497,319 )   $ (3,973404)

Basic and Diluted Net loss Per Common Stock

  $ (0.02 )   $ (0.09)

Weighted average number of common stock outstanding – basic and

diluted

    317,223,367       45,180,120

 

The accompanying notes are an integral part of these financial statements.

 

  F- 4  

 

Hemp Naturals, Inc.

Statements of Changes in Stockholder Equity

For the years ended November 30, 2018 and 2017

 

   

 

Common Stock  

                               
   

 

Shares

   

 

Amount

   

 

Additional Paid-in Capital  

 

 

Accumulated

Deficit

 

 

 

Subscription Receivable

 

 

Total Stockholder Equity (Deficit)

                                             
Balance, November 30, 2016   14,005,983     $ 1,401     $ 95,078     $ (50,698 )   $ —       $ 45,781
                                             
Proceeds from the sale of common shares   1,420,000       142       42,358       —                 42,500
Shares issued for services   250,700,000       25,070       7,495,930       —                 7,521,000
Contributed capital from related parties   —         —         75,785       —                 75,785
Net Loss   —         —         —         (3,973,404 )             (3,973,404)
Balance, November 30, 2017   266,125,983     $ 26,613     $ 7,709,151     $ (4,024,103 )   $ —       $ 3,711,662
                                             
Proceeds from the sale of common shares   450,000       45       23,955       —         (4,000 )     20,000
Issuance of common stock upon conversion of convertible debt   163,800       16       33,710       —         —         33,726
Shares issued for services   58,000,000       5,800       8,984,200       —         —         8,990,000
Contributed capital from related parties   —         —         72,341       —         —         72,341
Net loss   —         —         —         (6,497,319 )     —         (6,497,319)
Balance, November 30, 2018   324,739,783     $ 32,474     $ 16,823,358     $ (10,521,422 )   $ (4,000 )   $ 6,330,411

 

The accompanying notes are an integral part of these financial statements.

  

  F- 5  

 

HEMP NATURALS, INC.

STATEMENTS OF CASH FLOWS

 

    For the Year Ended November 30,
2018 		  For the Year Ended November 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES              
Net loss   $ (6,497,319 )   $ (3,973,404)
Adjustment to reconcile net loss to net cash used in operating activities:              
Expenses contributed to capital     67,241       —  
Stock based compensation     5,479,526       3,800,275
Loss on change of fair value of derivative liability     271,439       —  
Loss on conversion of debt     1,561       —  
Non-cash interest expense     469,374       —  
Changes in current assets and liabilities:              
 Deposits     —         1,530
 Inventory     (15,666 )     999
 Accrued expenses     16,732       6,308
Net cash used in operating activities     (207,112 )     (164,292)
               
CASH FLOWS FROM FINANCING ACTIVITIES              
             Proceeds from sale of common stock     20,000       42,500
              Proceeds from convertible notes payable     280,250       —  
  Contributed capital from shareholder     5,100       75,786
 Net cash provided by financing activities     305,350       118,286
               
Net increase/(decrease) in cash and cash equivalents     98,237       (46,006)
Cash and cash equivalents at beginning of year     11       46,017
Cash and cash equivalents at end of year     98,248       11
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:              
Cash paid for:              
     Interest   $ —       $ —  
     Income taxes   $ —       $ —  
               
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:              
Common stock issued recorded as prepaid expense
  $ 8,990,000     $ 3,900,000

   

The accompanying notes are an integral part of these financial statements.

 

  F- 6  

 

Hemp Naturals, Inc.

Notes to the financial statements  

 

Note 1 – Organization and Description of Business

 

Hemp Naturals, Inc. (the Company) was incorporated under the laws of the State of Delaware on November 13, 2015. The Company intends to offer consumer goods that are made of industrial hemp and/or the non-psychoactive ingredients of the cannabis plant.

 

The Company has elected November 30th as its year end.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").

 

  Inventories

 

Inventories, consisting of products available for sale, are primarily accounted for using the first-in, first-out ("FIFO") method, and are valued at the lower of cost or realizable value. This valuation requires Hemp Naturals, Inc. to make judgments, based on currently-available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category.

 

  Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at November 30, 2018 and November 30, 201 were $98,248 and $11, respectively.

 

Income Taxes

 

The Company accounts for income taxes under ASC 740, “ Income Taxes .”  Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs.  A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.  No deferred tax assets or liabilities were recognized at November 30, 2018.

 

  F- 7  

 

Basic Earnings (Loss) Per Share

 

The Company computes basic and diluted earnings (loss) per share in accordance with ASC Topic 260,  Earnings per Share . Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

 

The Company does not have any potentially dilutive instruments as of November 30, 2018 or 2017 and, thus, anti-dilution issues are not applicable.

 

Fair Value of Financial Instruments

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

ASC 820,  Fair Value Measurements and Disclosures , defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

  •          Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
  •          Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
  •           Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of November 30, 2018. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accrued expenses.

 

  F- 8  

 

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815,  Derivatives and Hedging Activities.

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments, when it has been determined that the embedded conversion options should not be bifurcated from their host instruments, as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.

Related Parties

 

The Company follows ASC 850,  Related Party Disclosures,  for the identification of related parties and disclosure of related party transactions.

 

Share-Based Compensation

 

ASC 718, “ Compensation – Stock Compensation ”, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “ Equity – Based Payments to Non-Employees.”   Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable:  (a) the goods or services received; or (b) the equity instruments issued.  The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.  

 

  F- 9  

  

Note 3 – Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any revenues since inception. For the year ended November 30, 2018, the Company has a net loss of $6,497,319 and an accumulated deficit of $10,521,422 at November 30, 2018. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. . At the date of this filing, management has spent several months focused on marketing, both online and at the retail level. The Company’s website has been developed Our expectation is that the promotional phase of rolling paper sales will transition to profitable operations during the next fiscal year, however there is no certainty regarding this. In the meantime, we plan to raise money in the next fiscal years by issuing convertible notes and privately selling shares of common stock. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Note 4 – Income Taxes

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not.  In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company has incurred a net operating loss carryforward of $10,521,422 which begins expiring in 2034. The Company has adopted ASC 740, “Accounting for Income Taxes”, as of its inception. Pursuant to ASC 740 the Company is required to compute tax asset benefits for non-capital losses carried forward. The potential benefit of the net operating loss has not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the loss carried forward in future years.

 

Significant components of the Company’s deferred tax assets are as follows:

 

    November 30,
    2018   2017
Deferred tax asset, generated from net operating loss   $ 2,209,499     $ 1,368,195
Valuation allowance     (2,209,499 )     (1,368,195)
    $ —       $ —  

 

The reconciliation of the effective income tax rate to the federal statutory rate is as follows:

 

Federal income tax rate                                                                           21.0%     34.0%
Increase in valuation allowance                                                                (21.0%)     (34.0%)
Effective income tax rate                                                                             0.0%     0.0%

               

  F- 10  

 

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law. This legislation reduced the federal corporate tax rate from the previous 35% to 21%. Tax filings for the Company for the years 2015 through 2017 are available for examination by tax authorities.

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

 

Note 5 – Commitments and Contingencies

 

The Company follows ASC 450-20,  Los s  Contingencies,  to report accounting for contingencies.  Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of November 30, 2018 and 2017 other than the below:

 

Office Space

The Company contracted the use of 3,000 square feet of space owned by our Secretary, Maryna Bleier, who has been and will be contributing the space, valued at $5,000 per month, to the Company as additional paid-in capital July 1, 2016 until July 1, 2028. Beginning July 1, 2028, the Company is obligated to pay $5,000 monthly for the use of their office space per the terms of the rental contract.

 

Note 6 – Prepaid Expenses

 

During the year ended November 30, 2017, the Company issued 130,000,000 shares of common stock as compensation for office rent and consulting services.

 

During the year ended November 30, 2018, the Company issued 58,000,000 shares of common stock as compensation for consulting services. The $7,231,200 in prepaid expenses consists of approximately $6,299,403 in prepaid consulting services and $931,797 in prepaid office rent.

 

The above transactions were originally recorded as prepaid expenses and are being amortized over the life of each respective contract for services.

 

Note 7 – Convertible Notes Payable

 

On February 28, 2018, the Company entered into a share purchase agreement with third party Adar Bays LLC (“Adar”) in which the Company issued a $78,750 promissory note to Adar at 8% annual interest and convertible into shares of the Company’s common stock at a conversion price equal to a 55% discount based on the lowest trading price for the previous twenty days. The one year promissory note was purchased March 6, 2018. On October 8, 2018, $10,000 of the principal of the loan was converted to 163,800 shares of common stock at a conversion price per share of $.06105.

 

On October 1, 2018, the Company entered into a share purchase agreement with third party Power Up Lending LLC (“Power Up”) in which the Company sold a $65,000 promissory note to Power Up at 12% annual interest and convertible into shares of the Company’s common stock at a conversion price equal to a 61% discount based on the lowest trading price for the previous twenty days. The one year promissory note was purchased October 4, 2018.

 

  F- 11  

 

On October 18, 2018, the Company entered into a share purchase agreement with third party Power Up Lending LLC (“Power Up”) in which the Company sold a $78,000 promissory note to Power Up at 12% annual interest and convertible into shares of the Company’s common stock at a conversion price equal to a 55% discount based on the lowest trading price for the previous twenty days. The one year promissory note was purchased October 22, 2018.

 

On November 8, 2018, the Company entered into a share purchase agreement with third party Bellridge Capital LP (“Bellridge”) in which the Company sold a $65,000 promissory note to Bellridge with a $6,500 original issue discount, at 12% annual interest and convertible into shares of the Company’s common stock at a conversion price equal to a 55% discount based on the lowest trading price for the previous twenty days. The one year promissory note was purchased November 14, 2018.

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair value of certain financial instruments, payables to related parties, and accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

 

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

The Company used Level 3 inputs for its valuation methodology for the conversion option liability for in determining the fair value using a Black-Scholes option-pricing model with the following assumption inputs:

 

ADAR BAYS LLC

 

   

March 6,

2018

  November 30, 2018
Annual dividend yield     —         —  
Expected life (years)     1       .25
Risk-free interest rate     2.00 %     2.6%
Expected volatility     219.0 %     971.0%

 

  F- 12  

POWER UP LENDING LLC

   

October 1,

2018

  November 30, 2018
Annual dividend yield     —         —  
Expected life (years)     1       .84
Risk-free interest rate     2.53 %     2.6%
Expected volatility     967.0 %     971.0%

 

POWER UP LENDING LLC

   

October 18,

2018

  November 30, 2018
Annual dividend yield     —         —  
Expected life (years)     1       .89
Risk-free interest rate     2.58 %     2.6%
Expected volatility     968.0 %     971.0%

 

BELLRIDGE CAPITAL LP

   

November 14, 2018

  November 30, 2018
Annual dividend yield     —         —  
Expected life (years)     1       .96
Risk-free interest rate     2.62 %     2.6%
Expected volatility     969.0 %     971.0%

 

    Fair Value Measurements at
    November 30, 2018
    Using Fair Value Hierarchy
    Level 1     Level 2     Level 3
Liabilities                      
Embedded derivative liabilities                     915,878
Total                   $ 915,878

 

 

  F- 13  

 

Derivative Liabilities

 

The embedded conversion features of the above convertible notes payable and warrants contain discounted conversion prices and should be recognized as derivative instruments. Such embedded conversion features should be bifurcated and accounted for at fair value. As of November 30, 2017 and November 30, 2018, the Company had a derivative liability balance of $0 and $915,878, respectively. The Company uses the Black-Scholes option-pricing model to calculate derivate liability. 

 

Fair Value of Embedded Derivative Liabilities:
     
November 30, 2017   $ —  
Addition     670,523
Converted     (26,084)
Changes in fair value recorded to operations     271,439
As of November 30, 2018   $ 915,878

 

Note 8 – Shareholder Equity

 

Preferred Stock

 

The authorized preferred stock of the Company consists of 20,000,000 shares with a par value of $0.0001. The Company has no shares of preferred stock issued and outstanding as of November 30, 2018 and 2017.

 

Common Stock

 

The authorized common stock of the Company consists of 500,000,000 shares with a par value of $0.0001. There were 324,739,783 and 266,125,983 shares of common stock issued and outstanding as of November 30, 2018 and 2017, respectively.

 

On October 11, 2017 170,000 shares of common stock were sold to 1 purchaser at a purchase price of $0.03 per share for gross proceeds of $5,000.

 

On October 18, 2017 1,250,000 shares of common stock were sold to 1 purchaser at a purchase price of $.03 per share for gross proceeds of $37,500, with $10,905 in cash received and $26,595 recorded as additional paid-in capital.

 

In the year ended November 30, 2017, 250,700,000 shares of common stock were issued to ten shareholders as compensation for office rent and various professional services, primarily business development.

 

In the year ended November 30, 2018, 58,000,000 shares of common stock were issued to two shareholders as compensation for consulting services, 450,000 shares of common stock were sold to three shareholders, for proceeds of $20,000, and 163,800 shares of common stock were issued for the conversion of a convertible note payable.

 

Pertinent Rights and Privileges

 

Holders of shares of Common Stock are entitled to one vote for each share held to be used at all stockholders’ meetings and for all purposes including the election of directors. Common Stock does not have cumulative voting rights. Nor does it have preemptive or preferential rights to acquire or subscribe for any unissued shares of any class of stock.

 

Holders of shares of Preferred Stock are entitled to voting rights where every one share of Preferred Stock has voting rights equal to one hundred shares of Common Stock.

 

Additional Paid In Capital 

 

During the year ended November 30, 2017, our CEO contributed cash of $6,976 to the Company to pay for expenses and paid $8,810 in operating expenses on behalf of the Company which is recorded as additional paid in capital. Our Secretary provided rental space to the Company totaling $60,000 for the 2017 fiscal year, which is recorded as additional paid in capital.

 

During the year ended November 30, 2018, our CEO paid $5,841 in operating expenses on behalf of the Company which is recorded as additional paid in capital. Our Secretary provided rental space to the Company totaling $60,000 for the 2018 fiscal year, which is recorded as additional paid in capital.

 

  F- 14  

 

Note 9 – Related-Party Transactions

 

Equity

 

On November 17, 2017, the Company issued 120,000,000 shares to our CEO as compensation for development of the business plan.

 

On November 17, 2017, the Company issued 45,000,000 shares to Blue Car Enterprise as compensation for a 2 year agreement to provide consulting to the Company. Blue Car Enterprise is an entity solely owned by our CEO.

 

On January 14 2018, the Company issued 29,000,000 additional shares to Blue Car Enterprise as compensation for a 2 year agreement to provide consulting to the Company.

 

Contributed Capital

 

As of November 30, 2018, our CEO has provided the Company contributed capital in the form of payment of expenses on behalf of the Company totaling $5,841 and our Secretary has provided the Company contributed office space valued at $60,000.

 

As of November 30, 2017, our CEO has provided the Company contributed capital in the form of cash and payment of expenses on behalf of the Company totaling $15,786 and our Secretary has provided the Company contributed office space valued at $60,000.

 

Office Space

 

At this time our main office space is provided to us rent free by our Secretary Maryna Bleier which is accounted for as contribution of $5,000 monthly. Our main office space is located at 16950 North Bay Road, Suite 1803 Sunny Isles Beach, Florida 33160. After July 1, 2028, the Company is obligated to pay $5,000 monthly.

 

Note 10 – Subsequent Events

 

In December 2018, Adar Bays, LLC converted the remaining convertible loan balance of $68, 750 to 1,115,433 common shares in the Company.

 

Subsequent to the fiscal year end, the Company sold eight convertible notes totaling $418,500. For three of these notes, the Company issued a total of 168,000 shares of the Company’s common stock.

 

Subsequent to the fiscal year end, the Company sold 3,440,000 shares of common stock at $.05 per share to five purchasers.

 

  F- 15  

 

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

(a) Previous independent registered public accounting firm
     
(i)    On March 14, 2018, Hemp Naturals, Inc., (the Company”) was notified that its independent registered public accounting firm, MaloneBailey, LLP, had resigned as its independent auditors.
     
(ii)   The reports of MaloneBailey, LLP on the Company's financial statements as of and for the fiscal years ended November 30, 2016 and 2015 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle except to indicate that there was substantial doubt about the Company ability to continue as a going concern.
     
(iii)   The Company's Board of Directors participated in and approved the decision to change independent registered public accounting firms.
     
(iv)    During the fiscal years ended November 30, 2016 and 2015 and through March 14, 2018, there have been no disagreements with MaloneBailey, LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to the satisfaction of MaloneBailey, LLP would have caused them to make reference thereto in connection with their report on the financial statements for such years.
     
(v)     The Company requested that MaloneBailey, LLP furnish it with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of the letter provided by MaloneBailey, LLP was filed as Exhibit 16.1 to the Form 8-K filed with the SEC on March 20, 2018
     
(b) New independent registered public accounting firm
     
(i)   On March 27, 2018 the Company engaged Paritz & Company, P.A. as its new independent registered public accounting firm. During the two most recent fiscal years and through March 14, 2018, the Company had not consulted with Parits & Company, P.A. regarding any of the following:
     
(ii)   The application of accounting principles to a specific transaction, either completed or proposed;
     
(iii)    The type of audit opinion that might be rendered on the Company’s financial statements, and none of the following was provided to the Company: (a) a written report, or (b) oral advice that Paritz & Company, P.A. concluded was an important factor considered by the Company in reaching a decision as to accounting, auditing or financial reporting issue; or
     
(iv)     Any matter that was subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K.

 

  9  

 

ITEM 9A.  CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we are responsible for conducting an evaluation of the effectiveness of the design and operation of our internal controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of November 30, 2018.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

As of November 30, 2018, management assessed the effectiveness of our internal control over financial reporting. The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the Company’s principal executive officer and the principal financial officer and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP in the United States of America and includes those policies and procedures that:

 

  • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;
     
  • Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
     
  • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statement.

 

In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework. Based on that evaluation, completed only by Levi Jacobson, our President and sole director, who also serves as our principal executive officer, principal financial officer and principal accounting officer, Mr. Jacobson concluded that, as of November 30, 2018, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below.

 

This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

  

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (i) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (ii) inadequate segregation of duties consistent with control objectives; and (iii) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our President and sole director, who also serves as our principal executive officer, principal financial officer and principal accounting officer, in connection with the review of our financial statements as of November 30, 2018.

 

Management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control Over Financial Reporting.

 

There were no changes in the Company’s internal control over financial reporting that occurred during the year ended November 30, 2018 that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B.  OTHER INFORMATION

 

Not applicable.

 

  10  

 

PART III

 

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The sole member of the Board of Directors of Hemp Naturals, Inc. serves until the next annual meeting of stockholders, or until his successors have been elected. The officers serves at the pleasure of the Board of Directors. The following table is the director and executive officers of Hemp Naturals, Inc.

 

Name Age Position
Levi Jacobson 26 Chief Executive Officer, Chief operations Officer, Chief Financial Officer, Chief Accounting Officer, Director
Maryna Bleier 31 Secretary

 

 

Levi Jacobson- Chief Executive Officer, Chief operations Officer, Chief Financial Officer, Chief Accounting Officer, Director

 

Mr. Jacobson studied business and economics at Touro College from 2010 to 2014, when he graduated. After graduation, Mr. Jacobson worked for Blue Car Enterprise as a Manager/Director specializing in sales and ad management until August 2015.

 

Maryna Bleier- Secretary

 

Mrs. Bleier graduated from the National Institute of Business in Ukraine with an International Business and Entrepreneurial Degree in 2008. From 2009 until 2014 Mrs. Bleier was self-employed as an importer of Ukrainian goods. The goods she has successfully imported into the United States have been distributed throughout the Country with a particular emphasis on Brighton Beach in Brooklyn.

 

Code of Ethics

 

Hemp Naturals, Inc. has not adopted a code of ethics which applies to the chief executive officer, or principal financial and accounting officer, because of our level of operations of the public entity in 2017.  Hemp Naturals, Inc. intends to adopt a code of ethics during calendar year 2019.

 

Audit Committee Financial Expert

 

Hemp Naturals, Inc. does not have either an Audit Committee or a financial expert on the Board of Directors.   The Board of Directors believes that obtaining the services of an audit committee financial expert is not economically rational at this time in light of the costs  associated  with  identifying and retaining an individual  who  would  qualify  as  an audit committee financial  expert,  the limited scope of our operations and the  relative  simplicity  of our financial statements and accounting procedures .

 

Section 16(a)  Beneficial Ownership Reporting Compliance

 

Section   16(a)  of  the  Exchange  Act  requires  Hemp Naturals, Inc.'s  officers, directors and persons  who  own  more than ten percent of a registered class of our equity securities to file reports  of  ownership  and  changes in ownership with the SEC.  Officers, directors and ten percent stockholders are required by regulation to furnish Hemp Naturals, Inc. with copies of all Section 16(a) forms they file.  During the year ended November 30, 2017, Hemp Naturals, Inc. believes that all such persons failed to file the reports required by Section 16(a) of the Exchange Act, including Forms 3, 4 and 5. Based on representations submitted by such people, Hemp Naturals, Inc. does not believe that such individuals purchased or sold any Hemp Naturals, Inc. Common Stock during 2018.

 

  11  

 

ITEM 11. EXECUTIVE COMPENSATION

 

Officer compensation for the year ended November 30, 2018 totaled $65,500. The CEO, Levi Jacobson, was paid $65,500 and the Secretary, Maryna Bleier, was paid $0, as compared to the year ended November 30, 2017 when the CEO was paid $23,235 and the Secretary was paid $19,285. These payments to the officers were made with cash available from sales of common shares and convertible notes. In addition, in November 2017, our CEO received 120,000,000 shares of common stock at $.03 as compensation for work performed for the Company. Due to the current lack of product sales, Mr. Jacobson and Ms. Bleier are not receiving any regular compensation, cash or otherwise, for their services until such times as revenues are forthcoming. Mr. Jacobson is the sole director. There is no option or non-cash compensation plan at this time. No amounts are paid or payable to the director for acting as such. In the year ended November 30, 2018, Hemp Naturals, Inc. had ___ board of directors meetings. In the year ended November 30, 2017, the Company had no board of directors meetings. No Board committees have been established. Due to the small size of Hemp Naturals, Inc.’s operations, the entire Board of Directors functions as the audit committee; Mr. Jacobson is not a “financial expert” as defined in Regulation S-K 407. We have no independent director.

 

The following table sets forth the compensation of the Company's sole executive officer for the years ended November 30, 2018 and 2017.

 

 

 

Name:

 

 

Fiscal Year:

 

Salary, Fees, Commissions ($):

 

 

Bonus ($):

 

Stock Awards ($):

 

Stock Options ($):

 

All Other Compensation ($):

 

 

Total ($):

Levi Jacobson

CEO, Director

  2018    --    --  -   --  65,500 65,500
    2017   --   -- $3,600,000   -- 25,235 37,235

Maryna Bleier

Secretary

  2018    --    --  --   --  - -
    2017   --   -- --   -- 19,285 19,285

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

             

The following table sets forth information relating to the beneficial ownership of Company common stock as of the date of this report by (i) each person known by Hemp Naturals, Inc. to be the beneficial owner of more than 5% of the outstanding shares of common stock, and (ii) each of Hemp Naturals, Inc. ' directors and executive officers. Unless otherwise noted below, Hemp Naturals, Inc. believes that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. For purposes hereof, a person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date hereof upon the exercise of warrants or options or the conversion of convertible securities. Each beneficial owner's percentage ownership is determined by assuming that any warrants, options or convertible securities that are held by such person (but not those held by any other person) and which are exercisable within 60 days from the date hereof, have been exercised.

 

  12  

 

Name  

 

Common Stock

 

 

Percentage (1)

Levi Jacobson     126,000,000       38.80%
Maryna Bleier     6,000,000       1.84%
All officers and directors as a group (2 persons)     132,000,000       40.64%
Mazel Property Enterprise     34,477,778       10.62%
Blue Car Enterprise     74,000,000       22.79%
Jewish Enrichment Center     45,000,000       13.86%
Elad National Properties     29,000,000       8.93%

 

(1) Based on 324,739,783 shares issued and outstanding as of November 30, 2018.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

On November 18, 2015 the Company issued 6,000,000 shares of restricted common stock to Levi Jacobson and 6,000,000 shares of restricted common stock to Maryna Bleier. The shares were issued in exchange for developing the Company’s business plan. The fair value of the shares issued as compensation was $0.0001 per share. The Company recorded 1,220 in stock based compensation. On November 17, 2017 the Company issued 120,000,000 shares of restricted common stock to Mr. Jacobson as compensation for developing the business plan. The fair value of the shares issued as compensation was $0.03 per share. The Company recorded $3,600,000 in stock based compensation. On November 17, 2017, the Company issued 45,000,000 shares to Blue Car Enterprise as compensation for a 2 year agreement to provide consulting to the Company. Blue Car Enterprise is an entity solely owned by our CEO. The fair value of the shares issued as compensation was $0.03 per share. $1,323,750 was posted as prepaid consulting and $26,250 was recorded as consulting fees. 

 

Director Independence

 

Currently, the Company does not have any independent directors. Since the Company’s Common Stock is not currently listed on a national securities exchange, we have used the definition of “independence” of the NASDAQ Stock Market to make this determination.

 

Under NASDAQ Listing Rule 5605(a)(2), an "independent director" is a "person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director."

 

We do not currently have a separately designated audit, nominating or compensation committee.  However, we do intend to comply with the independent director and committee composition requirements in the future.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The following table shows the fees that we paid or accrued for audit and other services for fiscal years 2018 and 2017.

 

    2018     2017
Audit Fees   $ 25,700     $ 6,000
Tax Fees     -       -
Total   $ 25,700     $ 6,000

 

Audit Fees

 

The amounts set forth opposite “Audit Fees” above reflect the aggregate fees billed or billable by Prager Metis CPA’s LLC (“Prager”) and Paritz & Company, P.A. (“Paritz”).

 

Prager had provided professional services for the audit of our fiscal 2018 annual financial statements.

 

Paritz had provided professional services for the audit of our fiscal 2017 annual financial statements and for the review of the financial statements included in our quarterly reports as well as review of our responses to the SEC.  

 

No tax consultant or other fees were paid.

 

Audit Committees pre-approval policies and procedures

 

We do not have an audit committee.  Our engagement of Pariz & Co., P.A. as our independent registered public accounting firm was approved by the Board of Directors.

 

  13  

 

PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

Exhibits.  The following exhibits of the Company are included herein.

 

3.1 Articles of Incorporation (1)
3.2 Bylaws(1)
31.1 Certification of Chief Executive and Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. Filed herewith.
31.2 Certification of Chief Executive and Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002. Filed herewith .
32.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

__________________

(1) Incorporated by reference to such exhibit as filed with the Company’s Form 1-A Offering Statement, file number 024-10523, filed on January 29, 2016.

 

All other Exhibits called for by Rule 601 of Regulation S-K are inapplicable to this filing.

 

  14  

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

    HEMP NATURALS, INC.  
       
Date: March 15, 2019   /s/ Levi Jacobson  
    Levi Jacobson, Chief Executive Officer, Chief Financial Officer, and Director  
       

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

       
Date: March 15, 2019   /s/ Levi Jacobson  
    Levi Jacobson, Chief Executive Officer, Chief Financial Officer, and Director  

 

  15  

 

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